• review of converting accounting profit to cash flow,
• review of accounting rate of return (ARR),
• payback period (PBP) and its limitations,
• time value of money calculations,
• net present value (NPV) and its limitations,
• internal rate of return (IRR) and its limitations, and
• use of profitability index (PI) under capital rationing condition.

• use of budgeting,
• preparation of a production budget, purchase budget, payment and collection schedule,
• calculation of inputs to the cash budgeting process,
• construction of a cash budget. [download: answer to example question in lecture notes]

January 29 , 2013

Dr. Thomas Wu

This module extends the knowledge of accounting by introducing the tools commonly used in management accounting and demonstrating their application in a decision making context. The sources, acquisition, and deployment of financial resources in a business and methods for comparative evaluation of financial performance are presented.

1. Apply numerical skills, management accounting concepts, and qualitative judgment to aid financial decision making.
2. Make judgments on the financial worth of projects and investments
3. Evaluate the performance and prospects of a company from a financial perspective
   

Preparing budgets:
Their use for control purposes, creation of functional and master budgets; calculation and interpretation of variances to assist business control. Business performance management, performance indicators.

Calculating product costs:
Using absorption costing and activity based costing; direct and indirect costs; attaching overheads to products; calculation of product costs based on activities they cause; comparison of activity based costing with absorption costing

Preparing break-even charts and contribution analyses:
Use as aids to decision making; contribution and profit calculations; break-even and profit-volume charts; assumptions and limitations of variable costing; use of contribution analysis in a variety of decision-making situations

Applying capital investment appraisal techniques:
Accounting rate of return, pay back period, net present value and internal rate of return; sensitivity analysis

1. Managerial Accounting for Business Decisions by R Proctor, 2nd Edition, FT Prentice Hall, 2006
2. Introduction to Accounting and Finance by G Black, FT Prentice Hall, 2005

1. Essential Finance and Accounting for Managers by L. Chadwick, FT Prentice Hall, 2002
2. Business Accounting and Finance by T Davies and B Pain, McGraw Hall, 2001
3. Business, Accounting and Finance by C Gowthorpe, 2nd edition, Thomson, 2005
4. Accounting for Business by Atrill, Harvey and mcLaney, 3rd Edition, Butterworth Heinemann, 2001

For this course, a general purpose non-financial calculator can be used. Students who do not have ready access to a financial calculator should be able to perform all the required analysis and calculations using a general purpose non-financial calculator for the tutorials, assignments, mid-term test, and final examination.

You can also use a non-programmable financial calculator for the tutorials, assignment, mid-term test, and final examination. Common financial calculators are HP12c and TI BAII PLUS. User manual in simplified chinese and a tutorial for the HP12c can be found here and a simple tutorial for the HP12c can be found here. User manual for the TI BAII can be found here.

Regardless of the types of calculators used for this course, students are responsible for their own equipment and they cannot be shared in a quiz, test, or examination situation. As a result, students MUST bring their own calculators to each class. In addition, each student must be proficient in the use of their own equipment.

Electronic translators CANNOT be used for quiz, test, or examination situations, but they can be used during class (only with volume off) and your own study time.

There are specific terms that apply to accounting and finance, and there are various online sources that can help students understand these terms.

Download and print for reference:

• Hong Kong Exchange glossary of terms (English to Chinese)
• 88translation.com finance dictionary (Chinese to English, English to Chinese)

Online finance dictionaries:

• Reuters Chinese to English and English to Chinese finance dictionary
• Goldman Sachs English to Chinese finance dictionary
• Goldman Sachs Chinese to English finance dictionary
• Morgan Stanley English to Chinese finance dictionary

Other unverified sources of financial references:

• Finance Street - a finance related site prepared by the government
• Financial glossary of terms
• List of dictionaries